[LOGO OF MGM GRAND]
[LETTERHEAD OF J. TERRENCE LANNI]
November 13, 2001
Dear Option Holder:
As you know, the recent tragic events have had a broad national impact. The
travel, vacation, casino and hotel industries have been particularly disrupted.
MGM MIRAGE is no exception.
However, your company is fundamentally sound. Among our great strengths are our
people, such as yourself, who have been so instrumental in making the MGM
MIRAGE merger the great success story it has been and who, we are confident,
will help the company emerge from these difficult times even stronger and
better able to serve our customers.
We know this has also been a difficult period for you personally. In order to
show MGM MIRAGE's support for your continuing efforts, the Board of Directors
has approved a program (described in the enclosed offering materials) whereby
you will be given an opportunity to surrender and cancel your existing stock
options having an exercise price of at least $23.00 per share in exchange for
the company's commitment to grant you stock options for 90% of the number of
shares subject to your cancelled options no earlier than six months and one day
after the date of cancellation of your existing options. The exercise price for
the replacement options will be the closing market price on the New York Stock
Exchange for the company's common stock on the date of grant. This price may be
higher or lower than the current market price for the company's common stock or
the exercise prices of your existing options. The vesting schedule and term of
the replacement options will be the same as apply to the options you surrender
and cancel.
If you have not been granted stock options subsequent to May 11, 2001, you may
participate with respect to any, all or none of your options, as you determine.
If you have been granted stock options subsequent to May 11, 2001 and you wish
to participate in the program as to any of your stock options (whenever
granted), you must surrender for cancellation all options granted to you since
May 11, 2001.
Whether or not this program is likely to be beneficial to you is something only
you can determine depending on your own particular facts and circumstances and
your own assessment of what the market price for the company's common stock is
likely to be when the exercise price for the replacement options is determined.
The actual terms and conditions of the program are contained only in the
enclosed offering materials, and a summary of terms of the stock option
exchange program is attached to this letter. I urge you to read the attached
summary of terms and enclosed materials carefully.
Thank you.
Sincerely,
/s/ J. Terrence Lanni
J. Terrence Lanni
SUMMARY OF TERMS OF OPTION EXCHANGE
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RESPONSE NEEDED BY 5 P.M., PACIFIC TIME, ON DECEMBER 12, 2001, UNLESS WE EXTEND
THE OFFER.
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You must complete, sign and date the election form and return it to Scott
Langsner, Senior Vice President and Secretary of MGM MIRAGE, c/o Bellagio, 3600
Las Vegas Blvd. South, Las Vegas, NV 89109, no later than 5 p.m., Pacific Time,
on December 12, 2001 (or such later date as the offer expires), via facsimile
at (702) 693-8830 or by hand delivery.
The following summarizes some of the terms and conditions of the offer to
exchange options. Please read the offer to exchange as well because the
information in this summary is not complete.
Why is the company making me this offer? We are making the offer to exchange
because a considerable number of employees and directors have stock options,
whether or not they are currently exercisable, with exercise prices that are
significantly above current and recent market prices for our common stock. This
program is voluntary and will allow optionees to choose whether to keep their
current stock options at their current exercise prices or to cancel those
options having an exercise price of at least $23.00 per share in exchange for
replacement options for 90% of the number of shares subject to the cancelled
options. By making this offer to exchange outstanding options for replacement
options that may have a lower exercise price, we intend to provide such
optionees with the benefit of owning options that over time may have a greater
potential to increase in value, create better performance incentives for
employees and maximize stockholder value.
Who can participate in the offer? You must be an employee of MGM MIRAGE or one
of our subsidiaries or a member of our board of directors on December 12, 2001
(or such later date as the offer expires). Except as otherwise provided by an
agreement with us or one of our subsidiaries, a person whose active employment
has been terminated but who is receiving a salary continuation benefit is not
an employee for purposes of this offer.
Which options can I tender for exchange? You may exchange any and all of your
options having an exercise price of at least $23.00 per share outstanding under
either of our nonqualified option plans. However, if you wish to participate in
the stock option exchange program, you must exchange for replacement options
all options held by you that were granted after May 11, 2001. (You would not be
required to exchange options granted on or prior to May 11, 2001, although you
could do so if you so desired.)
How many replacement options will I receive? Each replacement option will be
exercisable for 90% of the number of shares represented by the options tendered
pursuant to this offer. This means that for every ten shares represented by
options that you exchange, you will receive replacement options for nine
shares. In addition, the number of shares covered by your replacement options
will be adjusted for any stock splits, stock dividends, recapitalizations or
similar transactions that may occur between the expiration date and the date
your replacement options are granted.
What is the exercise price of the replacement options? The exercise price for
the replacement options will be the closing market price on the New York Stock
Exchange for the company's common stock on the date of grant, which will be no
earlier than June 13, 2002. This price may be at higher or lower prices than
current market prices for the company's common stock or the exercise prices of
your existing options.
What is the vesting schedule of the replacement options? The vesting schedule
of the replacement options will be the same as that of the options you
surrender and cancel.
What is the termination date of the replacement options? The termination date
of the replacement options will be the same as that of the options you
surrender and cancel.
What does the company recommend that I do? Although our board of directors has
approved this offer, neither we nor our board of directors makes any
recommendation as to whether or not you should tender your eligible options for
exchange. You must make your own decision whether to tender your eligible
options.
What happens to my eligible options if I accept the offer? If you accept the
offer, all of your eligible options which you have indicated you wish to
exchange on a properly completed election form, including all options granted
to you after May 11, 2001, will be cancelled and you will have no further right
or interest in those options, whether vested or unvested.
Will I have to pay taxes if I exchange my options in the offer? If you accept
the offer, you will not recognize income for U.S. federal income tax purposes
at the time of the exchange or at the time we grant replacement options to you.
We recommend that you consult with your own tax advisor to determine the tax
consequences of accepting the offer. If you are an employee based outside of
the United States, we recommend that you consult with your own tax advisor to
determine the tax and social contribution consequences of this transaction
under the laws of the country in which you live and work.
What happens if I don't accept the offer? If you do not accept the offer to
exchange options you will keep your current options and will not receive any
replacement options.
How should I decide whether or not to participate? We understand that this will
be a challenging decision for many of you as the program does carry
considerable risk. Whether or not this program is likely to be beneficial to
you is something only you can determine depending on your particular facts and
circumstances and your own assessment of what the market price for our common
stock will be when the exercise price for the replacement options is
determined. Your decision may take into account the exercise price or prices of
your existing options, as well as your assumptions about the future overall
economic environment, the performance of the overall market and companies in
our sector, the performance and prospects of our own business, the performance
of our stock in the stock market, as well as other factors.
Can I change my mind? Yes. After you turn in the election form, you can change
your election any time before the expiration of the offer. You may change your
election by delivering a new signed election form to Scott Langsner, Senior
Vice President and Secretary of MGM MIRAGE, c/o Bellagio, 3600 Las Vegas Blvd.
South, Las Vegas, NV 89109, no later than 5 p.m., Pacific Time, on December 12,
2001, via facsimile at (702) 693-8830 or by hand delivery. If we extend the
offer beyond that time, you may change your previous election at any time until
the extended expiration of the offer. You may change your election more than
once.
What would happen if I cease to be an employee or a director after the date
that my eligible options are cancelled and before the grant of the replacement
options? The replacement options will be granted to you, but unless there is an
agreement with you that provides otherwise, these options would expire 90 days
after the date they are granted and no additional vesting would occur from the
date you ceased to be an employee or director. Participation in this offer does
not confer upon you the right to remain one of our employees or directors.
Who can I talk to if I have questions about the offer? For additional
information or assistance, you should contact:
Employees of the Mirage Resorts Employees in the Employees of the
Companies (including Beau Rivage, corporate offices of MGM Grand
Bellagio, Golden Nugget, MGM MIRAGE and Companies (including
Mirage Hotel & Casino, Mirage Mirage Resorts (as well MGM Grand Hotel,
International, Mirage Resorts, as employees of MGM MGM Grand
Incorporated, Shadow Creek Grand Development Marketing, New York-
Club and Treasure Island) and MGM Grand New York, MGM
Merchandising and marketing Grand Detroit and the
employees) Primm Properties)
Chris Nordling Scott Langsner Corey Sanders
Executive Vice President of Senior Vice President Senior Vice President/Chief
Finance/Chief Financial Officer and Secretary Financial Officer
Bellagio, LLC MGM MIRAGE MGM Grand Hotel, LLC
3600 Las Vegas Blvd. South c/o Bellagio 3799 Las Vegas Blvd. South
Las Vegas, NV 89109 3600 Las Vegas Blvd. South Las Vegas, NV 89109
Tel: (702) 693-7137 Las Vegas, NV 89109 Tel: (702) 891-7004
Fax: (702) 693-7141 Tel: (702) 693-8811 Fax: (702) 891-7042
Fax: (702) 693-8830